Loophole for quick payday from Social Security closed

The Social Security Administration just closed a loophole that some wealthy people exploited for a quick payday at everyone's expense. Image from Wikimedia Commons.

Recently, Congress closed a loophole in Social Security that some people were exploiting for a quick payday. The loophole allowed the well off to get more instant cash out of the system than they would have otherwise. The government was not amused and closed the loophole.

Quick payday loophole in Social Security

Some people are creative when it comes to getting a quick payday. One way some people figured out how to was the Social Security administration, according to USA Today. People can file for Social Security benefits at age 62, but they get reduced benefits as long as they receive them. The loophole was that a person could withdraw their application to receive benefits and refile for benefits at full retirement age. They would get the full benefit they were entitled to, only if they repaid the quick cash they had already received. Essentially, some very wealthy people were getting low interest loans, in fact no interest loans, from the government.

Social Security Administration end scheme

Financial advisers had known about this and some told seniors to exploit this loophole. Social Security checks would go into savings, until they withdrew their request for benefits and refiled for benefits at full retirement age after repaying the government. The Social Security Administration figured the scheme out and put a halt to it. A retiree now has to file an application to cancel benefits within 12 months of originally receiving them. There had been no set window prior to the rule change. The scheme, while crafty, takes present and future money out of the pool for people receiving benefits. It isn’t as if the SSA can get payday loans if it needs them.

Social Security only way for some to subsist

Social Security is the only way some people are able to keep a roof over their head. There is some debate over whether it should exist, but it is hard to get past the fact that since Social Security and Medicare and Medicaid were launched, life expectancy and standards of living for seniors drastically improved in the United States.